CHAPTER 6. SHIPMENTS ANALYSIS

TABLE OF CONTENTS

**6.1 INTRODUCTION** 

**........................................................................................................... 6­1** 

**6.2 FORMULATION**  **OF SHIPMENTS**  **MODEL................................................................ 6­2**

**6.2.1 Stock**  **Events...................................................................................................... 6­3** 

**6.2.1.1 Replacing**  **Equipment...................................................................... 6­3** 

**6.2.1.2 New**  **Equipment**

**.............................................................................. 6­4** 

**6.3 DATA**  **INPUTS**

**............................................................................................................... 6­4** 

**6.3.1 Historical**  **Shipments......................................................................................... 6­4**

**6.3.2 Equipment**  **Class Breakdown............................................................................ 6­4** 

**6.3.3 Equipment**  **Life and**  **Survival Function.............................................................**  **6­5**

**6.3.3.1 Building**  **Growth Forecasts** 

**............................................................. 6­5** 

**6.4 RESULTS** 

**........................................................................................................................ 6­6** 

**REFERENCES**

**............................................................................................................................ 6­7** 

LIST OF TABLES

**Table 6.3.1**  **AEO 2009**  **Forecast of**  **Total Building**  **Floor Space.............................................**  **6­6**

**Table 6.4.1**  **Forecasted Shipments**  **of New**  **and Replacement**  **Commercial Boiler** 

**Equipment, 2012**  **Through 2042** 

**.......................................................................... 6­6** 

LIST OF FIGURES

**Figure 6.1.1**  **Flow Chart**  **Showing Inputs**  **to the**  **Shipments Model.......................................... 6­1** 

**Figure 6.3.1**  **Graph of**  **Weibull Function** 

**.................................................................................. 6­5** 

**6­ i** CHAPTER 6. SHIPMENTS ANALYSIS

6.1 INTRODUCTION

**Estimates of**  **commercial boiler**  **equipment (CBE)**  **shipments are**  **a necessary**  **input to** 

**national energy**  **savings (NES)**  **and net**  **present value**  **(NPV) calculations.**  **This chapter**  **describes**

**the U.S.**  **Department of**  **Energy’s (DOE’s)**  **methodology for**  **projecting annual**  **shipments of**  **CBE**

**and presents**  **results.**

**The Shipments**  **Model results**  **are driven**  **primarily by**  **base year**  **(2007) shipment**  **data for** 

**the 10**  **classes of**  **commercial boiler**  **equipment under**  **consideration (see**  **TSD chapter**  **4). The** 

**flow chart**  **presented in**  **Figure 6.1.1**  **outlines the**  **structure of**  **the Shipments**  **Model, which** 

**assumes that,**  **in each**  **year, the**  **existing commercial**  **boiler equipment**  **stock either**  **ages by**  **1 year** 

**or breaks.**  **Broken equipment**  **is replaced**  **and new**  **equipment can**  **be shipped**  **into new** 

**commercial floor**  **space.**

Figure 6.1.1 **Flow Chart**  **Showing Inputs**  **to the**  **Shipments Model** 

**The Shipments**  **Model is**  **in a**  **Microsoft Excel**  **spreadsheet format**  **embedded in**  **the**

**National Impacts**  **Model spreadsheet**  **that is**  **accessible on**  **the DOE**  **website at** 

**http://www1.eere.energy.gov/buildings/appliance_standards/commercial/ashrae_products_docs**

**_ meeting.html.** 

**This chapter**  **explains the**  **Shipments Model**  **and its**  **derivation in**  **detail. Section**  **6.2**

**discusses the**  **formulation of**  **the model,**  **section 6.3**  **describes the**  **data input**  **to the**  **model, and** 

**section 6.4**  **presents the**  **results for**  **the base­case**  **energy conservation**  **standard level**  **scenario and** 

**discusses the**  **development of**  **higher standard**  **level scenarios.**  **The energy**  **conservation standards** 

**for commercial**  **boiler equipment**  **will set**  **the maximum**  **allowable rated**  **energy consumption**  **for**

**all equipment**  **within an**  **equipment class.** 

**Shipment forecasts**  **were determined**  **for the**  **baseline level**  **and all**  **higher efficiency**  **levels**

**(reflecting potential**  **higher standard**  **levels) for**  **which NES**  **and NPV**  **are required.**  **DOE is** 

**6­1 considering**  **up to**  **four efficiency**  **levels plus**  **one baseline**  **efficiency level**  **for each**  **of the** 

**10 equipment**  **classes.**

6.2 FORMULATION OF SHIPMENTS MODEL

**The Shipments**  **Model is**  **a description**  **of commercial**  **boiler equipment**  **stock flows**  **as a** 

**function of**  **year and**  **equipment age**  **in the**  **stock. While**  **there are**  **10 equipment**  **classes, no** 

**coupling is**  **assumed between**  **them, so**  **the equations**  **describe each**  **type of**  **equipment**

**independently.**

**This section**  **begins with**  **a definition**  **of the**  **different commercial**  **boiler equipment**  **stock**

**categories. DOE**  **formulates the**  **equations as**  **updates of**  **the distribution**  **of stock**  **in year**  t **as a** 

**function of**  **age** a **to year**  t+1

**.**

**DOE used**  **industry­provided data**  **of base­year**  **(2007) shipments**  **to calculate**  **current**

**shipments by**  **equipment class.**  **It used**  **the lifetime**  **of the**  **equipment and**  **a corresponding** 

**survival function**  **to estimate**  **a replacement**  **rate for**  **existing stock.**  **DOE then**  **used this** 

**information combined**  **with estimates**  **from the**  **DOE Energy**  **Information Administration’s** 

**(EIA’s)** Annual Energy Outlook 2009 **1**

. **For the**  **results presented**  **in this**  **chapter, DOE**  **used the** 

**AEO 2009**  **April 2009**  **reference case**  **including American**  **Recovery and**  **Reinvestment Act** 

**(ARRA) (hereafter**  **referred to**  **as AEO**  **2009) for**  **surviving and**  **new commercial**  **floor space**  **in**

**2007, along**  **with an**  **assumption of**  **constant boiler**  **saturation rates**  **across the**  **stock and**  **in new** 

**construction, to**  **determine the**  **percentage of**  **shipments to**  **existing buildings**  **and to**  **new**

**construction. Then,**  **DOE forecasted**  **new sales**  **as a**  **function of**  **new construction**  **by multiplying** 

**new building**  **floor space**  **by the**  **share of**  **new shipments**  **(1­replacement ratio).**  **Sales of**  **new and** 

**replacement equipment**  **are recorded**  **by the**  **year sold,**  **and each**  **annual vintage**  **is depreciated** 

**over the**  **estimated life**  **of the**  **equipment. At**  **the beginning**  **of a**  **new year,**  **DOE determines**  **the**

**fraction of**  **stock that**  **has failed**  **based on**  **the survival**  **function (see**  **section 6.3.3)**  **and uses**  **an**

**assumed replacement**  **rate to**  **find replacement**  **sales for**  **that year.**  **Total sales**  **for that**  **year are** 

**replacement sales**  **plus new**  **stock. Sales**  **in each**  **year are**  **allocated to**  **the 10**  **equipment classes**  **in**

**proportion to**  **their relative**  **base­year shipments.**  **DOE assumed**  **that all**  **units experience**  **a normal** 

**rate of**  **repairs and**  **that this**  **is included**  **in the**  **average lifetime**  **of the**  **equipment.**

**In view**  **of industry**  **practice, available**  **information suggests**  **that the**  **average lifetime**  **of a** 

**unit is**  **30 years**  **(see TSD**  **chapters 2**  **and 5).**  **The age**  **of base­year**  **stock for**  **each equipment**  **class**

**was developed**  **by application**  **of a**  **survival function**  **(based on**  **a Weibull**  **distribution with**  **a mean** 

**life of**  **30 years)**  **to an**  **assumed constant**  **level of**  **shipments into**  **the building**  **population over**  **a**

**45­year period.**  **This results**  **in a**  **steady­state long­term**  **distribution of**  **the vintages**  **of the** 

**equipment in**  **the building**  **population for**  **2007. The**  **total stock**  **of age**  a **in a**  **given year**  t **is**

**represented by** 

U

**(t,a)**

**=** U 0 **(t,a)** Eq. 6.1

**and the**  **average age**  **of the**  **stock in**  **year** y **is defined**  **as**

StockAge **(t)**

**= ∑** 

**a** U **( t,**  **a) x**  **a /**  **∑(** U **( t,a))**  Eq. 6.2

**6­2 where** 

a **= age**  **of stock,** 

t **= year,** 

U

**(** t,a **)**

**= total**  **stock of**  **age** a **in a**  **given year**  y

**,** U

**0 (**  t,a **)**

**= stock**  **of existing**  **units.**

**The shipments**  **of new**  **stock in**  **a given**  **year are**  Uship(t)

**. By**  **definition, the**  **age of**  **the**

**equipment is**  **zero in**  **the year**  **that it**  **is shipped,**  **so that**  Uship(t)

= U(t,0)

**.**

6.2.1 Stock Events

**In the**  **transition from**  **year** t **to year**  t+1

**, two**  **things could**  **happen to**  **the stock**  **of**

**commercial boiler**  **equipment:**

**1. existing**  **equipment could**  **fail and**  **be replaced,**  **or**

**2. the**  **stock could**  **simply age**  **by 1**  **year.**

**In the**  **model, early**  **replacements (**  i.e.

**, existing**  **equipment that**  **is replaced**  **before the** 

**expected end**  **of service**  **life) are**  **not considered,**  **and all**  **failed equipment**  **is assumed**  **to be** 

**replaced by**  **a similar**  **replacement boiler**  **(** e.g.

**, no**  **change of**  **equipment is**  **assumed). The**  **model is** 

**capable of**  **forecasting total**  **shipments with**  **replacement rates**  **different than**  **100 percent,**  **but this** 

**was not**  **implemented because**  **of lack**  **of data.**  **The following**  **sections present**  **the equations**  **used**

**to represent**  **each possible**  **event.**

6.2.1.1 Replacing Equipment

**DOE determines**  **the probability**  **that commercial**  **boiler equipment**  **of age**  a **from stock**  U **0**

**will break**  **or will**  **be replaced**  **using a**  **Weibull survival**  **distribution function**  PB **1** (a), **with a**  **scale**

**parameter of**  **33.1 and**  **a shape**  **parameter of**  **4 such**  **that** PB **1** (a)=W(4,33.1) **results in**  **a 30­year** 

**average lifetime**  **with a**  **minimum lifetime**  **of about**  **8 years,**  **and a**  **maximum lifetime**  **of about** 

**50 years**  **(consistent with**  **industry comments).**  **Similarly, the**  **probability that**  **equipment of**  **age** a

**from stock**  U 1 **will fail**  **is given**  **by the**  **same function**  PB **1** (a)

**. These**  **probabilities do**  **not depend** 

**on the**  **model year**  t

**. DOE**  **defines the**  **quantities of**  **replaced equipment**  **as**

UB **(t, a)** 

**=** PB 0 **(a) x**  UB 0 **(t,a)** Eq. 6.3

**where**

UB **0 (**  t,a **)**

**= stock**  **of existing**  **units,**

PB **0 (**  a **)**

**= probability**  **that stock**  **of existing**  **units will**  **fail, or**  **will be**  **replaced,**

U

**0 (**  t,a **)**

**= stock**  **of existing**  **units,**

a **= age**  **of stock,** 

t **= year.** 

**6­3**6.2.1.2 New Equipment

**New commercial**  **boiler equipment**  **will be**  **purchased to**  **replace the**  **units described** 

**above. Available**  **information suggests**  **that the**  **purchase of**  **new equipment**  **that would**  **go into** 

**new buildings**  **is driven**  **by total**  **building floor**  **space. DOE**  **uses AEO**  **2009 projections**  **through**

**2030 to**  **create a**  **building floor**  **space index.**  **DOE uses**  **these floor**  **space projections**  **to create**  **an**

**index that**  **is used**  **to estimate**  **future boiler**  **sales by**  **inflating base­year**  **sales. The**  **total of**  **new**

**equipment shipments**  **is the**  **estimated total**  **shipments for**  **2007 multiplied**  **by the**  **index of**  **new**

**construction of**  **square feet**  **of buildings**  **for each**  **future year.** 

**DOE has**  **no information**  **about the**  **variation in**  **the market**  **saturation of**  **commercial boiler** 

**equipment by**  **building type**  **or over**  **time. Therefore,**  **in the**  **model, the**  **purchase of**  **new**

**equipment is**  **driven by**  **the construction**  **of new**  **floor space**  **and the**  **replacement of**  **broken or** 

**removed equipment**  **on a**  **one­for­one basis.** 

6.3 DATA INPUTS

6.3.1 Historical Shipments

**Historical shipments**  **are necessary**  **to calibrate**  **a shipments**  **model to**  **the existing**  **market.**

**DOE has**  **no data**  **for historical**  **shipments of**  **commercial boilers**  **and therefore**  **developed a**  **model**

**that relies**  **on 2007**  **shipments to**  **make its**  **predictions. All**  **remaining stock**  **from historical** 

**shipments is**  **assumed to**  **be distributed**  **across vintages**  **based on**  **the survival**  **function and**  **an**

**assumption of**  **constant boiler**  **shipments over**  **time into**  **the building**  **population.**

6.3.2 Equipment Class Breakdown

**DOE organized**  **commercial boiler**  **equipment into**  **either gas­ or**  **oil­fired equipment** 

**classes according**  **to the**  **boiler’s input**  **capacity size,**  **output, input,**  **and draft**  **type based**  **on the** 

**ASHRAE 90.1­2007**  **equipment classes** 

**. Following**  **these guidelines,**  **DOE used**  **the following**  **10**

**equipment classes:** 

• **Small gas­fired**  **hot water**  **boilers;**

• **Small gas­fired**  **steam, all**  **except natural**  **draft;**

• **Small gas­fired**  **steam, natural**  **draft boilers;** 

• **Small oil­fired**  **hot water**  **boilers;**

• **Small oil­fired**  **steam boilers;** 

• **Large gas­fired**  **hot water**  **boilers;**

• **Large gas­fired**  **steam all**  **except natural**  **draft boilers;** 

• **Large gas­fired**  **steam natural**  **draft boilers;** 

• **Large oil­fired**  **hot water**  **boilers; and** 

• **Large oil­fired**  **steam boilers.** 

**6­4**6.3.3 Equipment Life and Survival Function

**DOE determined**  **the average**  **lifetime for**  **commercial boilers**  **to be**  **30 years.**  **DOE**

**developed a**  **survival function**  **based on**  **a Weibull**  **distribution (see**  **Figure 6.3.1)**  **that generated**  **a**

**minimum lifetime**  **of commercial**  **boiler equipments**  **of about**  **8 years,**  **and a**  **maximum lifetime**  **of**

**about 50**  **years. As**  **commercial boiler**  **equipment enters**  **and ages**  **through the**  **total stock,**  **each**

**boiler has**  **percentage chances**  **of surviving**  **to the**  **next year**  **or failing**  **(1­survival probability)** 

**based on**  **its failure**  **rate for**  **the general**  **population according**  **to its**  **vintage.**



### Survival Function for Boiler Equipment

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 110%

5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60

Equipment AgePercentageRemaining

Figure 6.3.1 Survival **Function for**  **Commercial Packaged**  **Boilers (Weibull­based)** 

6.3.3.1 Building Growth Forecasts

**The amount**  **of commercial**  **floor space**  **is the**  **main driver**  **for commercial**  **boiler**

**equipment shipments**  **and is**  **appropriately one**  **of the**  **basic inputs**  **into the**  **Shipments Model.** 

**DOE took**  **the projected**  **floor space**  **construction after**  **the year**  **2003 from**  **the National** 

**Energy Modeling**  **System (NEMS)**  **projection published**  **in the**  **AEO 2009.**  **AEO 2009**  **lists the** 

**projections for**  **years 2004**  **to 2030.**  **Beyond 2030,**  **DOE extrapolated**  **a 10­year**  **trend of**  **AEO**

**projected data**  **between 2020**  **and 2030**  **to estimate**  **future growth**  **in commercial**  **building stock** 

**from 2030**  **through 2042.** 

The total of new floor space is the estimated total floor space for 2007 multiplied by an

index of new construction of floor space for buildings for each future year (see

**Table 6.3.1).**  **The index**  **is based**  **on the**  **estimated growth**  **in each**  **year from**  **2012 through** 

**2042, divided**  **by the**  **2007 estimated**  **growth value.** 

**6­5**Table 6.3.1 **AEO 2009**  **Forecast of**  **Total Building**  **Floor Space** 

Year Total Building Floor Space

(Million Square Feet) Floor Space Index

(2007 Base Year)

**2009**

**2010**

**2015**

**2020**

**2025**

**2030**

**Annual Growth**  **Factor,**

**2030 through**  **2042 80,094** 

**81,069**

**85,570**

**91,506**

**97,488**

**103,930**

**1.012% 1.037** 

**1.049**

**1.107**

**1.184**

**1.262**

**1.345**

6.4 RESULTS

**Table 6.4.1**  **shows the**  **forecasted shipments**  **for new**  **and replacement**  **commercial**

**packaged boilers**  **from 2012**  **through 2042**  **as calculated**  **with the**  **Shipments Model.** 

Table 6.4.1 **Forecasted Shipments**  **of New**  **and Replacement**  **Commercial Boiler**  **Equipment,**

**2012 Through**  **2042 (Base**  **Case)**

Units Shipped by Year by Equipment Class

Equipment Class 2012 2015 2020 2025 2030 2035 2040 2042 Cumulative

**Small, Gas­Fired,**  **Hot Water**  **7110 7377**  **7832 8364**  **9420 11019**  **13023 13812**  **292,525**

**Small, Gas­Fired,**  **Steam, All** 

**Except Natural**  **Draft 2409**  **2500 2654**  **2834 3192**  **3734 4413**  **4680 99,120** 

**Small, Gas­Fired,**  **Steam, Natural** 

**Draft 3702**  **3841 4078**  **4355 4905**  **5737 6780**  **7191 152,306** 

**Small, Oil­Fired,**  **Hot Water**  **1998 2073**  **2201 2350**  **2647 3096**  **3659 3881**  **82,197**

**Small, Oil­Fired,**  **Steam 3349**  **3475 3690**  **3940 4438**  **5191 6135**  **6506 137,801** 

**Large, Gas­Fired,**  **Hot Water**  **1146 1189**  **1262 1348**  **1518 1776**  **2099 2226**  **47,142**

**Large, Gas­Fired,**  **Steam, All** 

**Except Natural**  **Draft 2086**  **2164 2298**  **2454 2764**  **3233 3821**  **4052 85,823** 

**Large, Gas­Fired,**  **Steam, Natural** 

**Draft 2674**  **2774 2945**  **3145 3542**  **4144 4897**  **5194 109,999** 

**Large, Oil­Fired,**  **Hot Water**  **558 579**  **615 657**  **740 865**  **1022 1084**  **22,967**

**Large, Oil­Fired,**  **Steam 4407**  **4572 4855**  **5184 5839**  **6830 8072**  **8561 181,317** 

**Total 29440**  **30544 32429**  **34629 39004**  **45625 53920**  **57188 1,211,199** 

**As equipment**  **purchase price**  **increases with**  **lower energy**  **consumption levels,**  **a drop**  **in**

**shipments could**  **be expected**  **relative to**  **the base**  **case. Although**  **there is**  **a provision**  **in the** 

**spreadsheet for**  **a change**  **in shipments**  **as the**  **efficiency level**  **increases (or**  **energy consumption** 

**level decreases),**  **DOE has**  **no information**  **with which**  **to calibrate**  **such a**  **relationship. Therefore,** 

**for the**  **Notice of**  **Proposed Rulemaking**  **analysis, DOE**  **presumes that**  **the shipments**  **do not** 

**change in**  **response to**  **higher efficiency**  **levels being**  **considered as**  **possible standard**  **levels.**

**Results from**  **this model**  **provide an**  **indication of**  **future stock**  **growth for**  **the years**  **2012**

**through 2042,**  **but, because**  **of the**  **nature of**  **the model**  **and the**  **lack of**  **shipments data,**  **the model** 

**does not**  **retroactively match**  **the shipments**  **in 2007**  **(approximately 36,000**  **units, reported**  **in TSD** 

**chapter 2).**  **However, over**  **the period**  **for which**  **shipments were**  **analyzed the**  **average shipments** 

**per year**  **were 39,070**  **boilers per**  **year. The**  **average annual**  **shipment number**  **for the**  **period from** 

**2012 through**  **2042 was**  **approximately 8­percent**  **higher than**  **the 2007**  **shipment estimates.** 

**6­6**REFERENCES

**1. U.S.**  **Department of**  **Energy/Energy Information**  **Administration. 2009.**  Annual Energy

Outlook 2009

**. DOE/EIA­0383(2009),**  **DOE/EIA, Washington,**  **D.C.**

**6­7**ACRONYMS AND ABBREVIATIONS

**AEO Annual**  **Energy Outlook** 

**CRE commercial**  **boiler equipment** 

**DOE U.S.**  **Department of**  **Energy**

**EIA Energy**  **Information Administration** 

**NEMS National**  **Energy Modeling**  **System**

**NES national**  **energy savings** 

**NOPR Notice**  **of Proposed**  **Rulemaking**

**NPV net**  **present value** 

**6­8**